Spring Clean Before You Get Audited

For whatever reason, this past year we have seen a marked increase in clients getting audited by various agencies such as the Minnesota Department of Human Rights, the U.S. Department of Labor, and the U.S. Department of Homeland Security. Unfortunately for those employers audited, once the agency comes knocking, they are pretty much stuck in damage control with very little time to respond (especially with unannounced “visits”). Accordingly, as you are thinking about spring cleaning at home, keep your business in mind as well. When assisting with an internal audit, we can almost guarantee finding at least a dozen technical or other violations in each business audited; not because they are willful, but because there are so many nuances to be aware of.

Below are some key takeaways from some of the audits we assisted with in the past year. If you need any audit assistance with an actual audit, internal audit, training, forms or affirmative action plan, please don’t hesitate to contact us.

Department of Homeland Security - Form I-9s

  • Have all your I-9s in one binder or file as you will have very little time to produce them.
  • The new version (dated 11/14/2016) must now be used exclusively.
  • Section 1 must be completed by the employee on the first day of employment (not the third day).
  • The rest of the Form I-9 must be completed by the employer by the employee’s third day.
  • If you use E-Verify, it will alert you to document expirations; if you do not use E-Verify be sure to calendar the due date for re-verification of expired documents; also be sure this is done in a manner so that the due date is not tied to an individual’s calendar (they may not be employed in two or three years when it expires and then you have a violation).
  • Do not be sloppy or abbreviate. The entire corporate name and address must be completed (if not, it is a technical violation).
  • Verify the employee has filled in the correct information. For example, if an employee puts the current date where it says “Date of Birth”, it will be your technical violation.
  • On the top of page 2, be sure the Employee’s information from Section 1 is completed.
  • If you find errors, correct them now, but be careful how you make the corrections. For example, an employer cannot change an employee’s answer, but can make a notation in the margin with your initials.
  • If you get audited and you get a Notice of Suspect Documents, you will have a very limited time to verify an employee’s employment eligibility; use caution with this process and the continued employment of such individuals (some may be correctable document errors and some may not be authorized to work).

Minnesota Department of Human Rights – Government Contractors

  • You must have an affirmative action plan for each year. A four (4) year Minnesota compliance certificate does not mean you need an affirmative action plan every four (4) years! Your affirmative action plan must be updated annually.
  • You should also have an annual training on the results of your affirmative action plan (both in the changes from year to year and goals for following year). Provide management training and have the hiring managers (and up) sign off that they were there.
  • Document retention policy – the MDHR continues to insist (though we can find no legal support for it) that an employer must have a document retention policy, and that the policy should state that all documents related to administrative charges be retained until final disposition of the charge.
  • Employment applications – the MDHR has objected to questions such as how a person was discharged from the military and whether the applicant knows anyone in the business and whether they are related. Review your application and ask whether a question would elicit a response which would provide information that may screen out minority or other protected class applicants.
  • The MDHR will require a copy of “all correspondence that the company has sent to the Minnesota Department of Employment and Economic Development during the last 12-month period requesting referrals for qualified individuals with disabilities.” Thus, for every job posted, a letter must be sent to DEED regarding the position and asking for such referrals.
  • Training materials concerning the hiring process – be sure you train all individuals “involved in the recruiting, screening, selecting, promotion, disciplinary and related processes” to “ensure elimination of bias in all personnel action”. This goes further than human resources – the MDHR will require documentation for managers. Management training with sign-off sheets would accomplish this.
  • Retain documents related to the use of referral sources for minority or female applicants (such as secondary schools, colleges and trade groups).
  • Retain documents related to internship and apprenticeship programs. If you “promote from within”, they will want to see “good faith efforts” to develop and maintain “on-the-job training opportunities for females and minorities.”

U.S. Department of Labor

  • Verify employees are properly classified as exempt/non-exempt. Pay particular attention to sales employees, marketing, and office workers.
  • Ensure independent contractors are properly classified, have a contract with the entity, and retain 1099s.
  • Be sure you are properly calculating travel time for non-exempt employees.
  • Ensure employees are provided time to eat a meal.
  • Recordkeeping – these are the easiest violations to spot – you’ve either kept the required records or not.
  • Have employee timecards accessible for three years.
  • Have payroll stubs/history and employee wages accessible for three years, including W-2s.
  • Keep in mind that the DOL auditor is just there to address and audit compliance with federal wage and hour laws; I just sat in an audit where the DOL auditor instructed the employer as to a withholding issue that is inconsistent with Minnesota law. Accordingly, recall that just because the FLSA permits something, does not mean that Minnesota law allows it. If Minnesota laws are more strict (advantageous to employee), Minnesota law must be followed instead.

If you have questions regarding this article or other labor and employment law matters, or get audited or need assistance with an internal audit or any of the above documents, training, or forms, please contact Corie Tarara or any other attorney at Peters, Revnew, Kappenman & Anderson, P.A.